Application for Relief from Double Taxation Pursuant to RP- US Tax Treaty in Relation to RP-Germany, Tax Treaty

January 2, 1996 BIR RULING NO. 003-96 28 (b) (6) 000-00 003-96 Sanitary Wares Manufacturing Corporation Bo. Santolan, Pasig City Attention: Mr . Leonardo R . Dominguez Vice President & Chief Financial Officer Gentlemen : This refers to your letter dated July 19, 1995 requesting on behalf of American Standard Inc., application for relief from double taxation pursuant to RP- US Tax Treaty in relation to RP-Germany, Tax Treaty. cdta It is represented that Sanitary Wares Manufacturing Corporation (licensee) is a corporation organized and existing under the laws of the Republic of the Philippines, with principal office at 2nd floor, Feliza Building, 108 Herrera St., Legaspi Village, Makati, Metro Manila: that it has an Amended Licensing and Technical Assistance Agreement with American Standard Incorporated, (licensor) a US corporation organized under the laws of Delaware; that under the agreement the former was granted the license to use trademarks, patents and know-how in connection with the manufacture of vitreous china sanitary wares, brass fittings, acrylic tubs and other allied products; that for and in consideration of the benefits afforded to the licensee, the licensor shall be paid a royalty fee equivalent to five per cent (5%) of net sales of the products payable on a quarterly basis in US dollars currency, computed at the exchange rate prevailing on the date of payment. In reply, please be informed that pursuant to Article 13 paragraph 2(b) (iii), of the RP-US Tax treaty, the tax imposable on royalties derived by a resident of the United States from sources within the Philippines shall be the lowest rate of Philippine tax that may be imposed on royalties of the same kind paid under similar circumstances to a resident of a Third State. Article 12, paragraph (2) (b) of the RP-Germany Tax Treaty, provides that the royalties arising in the Philippines paid to a resident of Germany may also be taxed in the Philippines but the tax charged shall not exceed 10% of the gross amount of royalties. The said treaty also provides that for as long as the transfer of technology under the Philippine law is subject to approval, the limitation of the tax rate mentioned under the foregoing provisions shall, in the case of royalties arising in the Republic of the Philippines, only apply if the contract giving rise to such royalties have been approved by the competent authorities. Accordingly, since the Licensing and Technical Assistance Agreement between American Standard Inc. and Sanitary Wares Manufacturing Corporation was duly registered and approved by the Bureau of Patents, Trademarks and Technology Transfer then the royalties arising from said agreement shall be subject only to a ten per cent (10%) withholding tax before remittance. This approval shall be valid for five(5) years effective March 13, 1995, unless otherwise revoked by this Office. This ruling is issued on the basis of the foregoing representations. However, if upon investigation, it will be disclosed that the facts are different and/or any of the requirements imposed in this letter is not complied with, then this ruling shall be declared null and void. aisadc Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue